[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 771 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 771

    To amend the Elementary and Secondary Education Act of 1965 to 
 authorize grants to States for the construction, repair, renovation, 
 and modernization of public school facilities, to amend the Internal 
      Revenue Code of 1986 to expand the tax incentives for such 
                 undertakings, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 28, 2001

 Mr. Blagojevich introduced the following bill; which was referred to 
 the Committee on Education and the Workforce, and in addition to the 
Committee on Ways and Means, for a period to be subsequently determined 
 by the Speaker, in each case for consideration of such provisions as 
        fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
    To amend the Elementary and Secondary Education Act of 1965 to 
 authorize grants to States for the construction, repair, renovation, 
 and modernization of public school facilities, to amend the Internal 
      Revenue Code of 1986 to expand the tax incentives for such 
                 undertakings, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal School Construction Act of 
2001''. This Act may also be cited as the ``Schools for the 21st 
Century Act''.

SEC. 2. FINDINGS.

    The Congress finds as follows:
            (1) In 1950, the United States was suffering the effects of 
        an inadequate transportation system. The conventional wisdom 
        was that roads were a local concern.
            (2) President Dwight D. Eisenhower determined that a 
        deficient transportation system was a threat to our economy and 
        our national security.
            (3) Today, the interstate highway system stands as a 
        testament to discarding old ways of thinking to meet modern 
        demands.
            (4) Like the interstate highway system in the 1950's, the 
        state of our public school facilities is a national concern, 
        with national consequences.
            (5) According to the National Center for Education 
        Statistics, it will cost $127,000,000,000 to render the 
        condition of public elementary and secondary school facilities 
        in the United States adequate.
            (6) Of the $112,000,000,000 that the Comptroller General of 
        the United States estimated in 1996 was needed for such 
        purpose, approximately $11,000,000,000 was deemed necessary in 
        order to comply with Federal mandates, such as asbestos removal 
        and ensuring access for students with disabilities.
            (7) According to the American Society of Civil Engineers, 
        the United States needs to spend $60,000,000,000 for new school 
        construction to accommodate 3,000,000 students.
            (8) According to the National Center for Education 
        Statistics, \3/4\ of the schools in the United States reported 
        needing to spend money on repairs, renovations, and 
        modernization in order to put school buildings into good 
        overall condition.
            (9) In 1999, the average age of school buildings in the 
        United States was 40, the age at which most buildings can 
        deteriorate rapidly.
            (10) The Comptroller General of the United States reported 
        that the largest proportion of schools reporting deteriorating 
        school conditions were in central cities serving more than 50 
        percent minority students or 70 percent or more of poor 
        students. However, one of every two rural school reported at 
        least one inadequate school structural feature.
            (11) According to the National Center for Education 
        Statistics, the average dollar amount schools reported needing 
        to spend for repair per school was $2,200,000, or approximately 
        $3,800 per student.
            (12) Estimates of the cost of new construction for schools 
        vary. According to the magazine School Planning and Management, 
        in terms of the national profile of new schools being 
        constructed, the median cost for an elementary school is 
        $8,000,000, for a middle school is $12,000,000, and for a high 
        school is $18,900,000. According to the magazine American 
        School and University such median costs are $9,200,000, 
        $14,300,000, and $21,500,000, respectively. There are regional 
        variations in costs as well.
            (13) In examining trends in annual State school 
        construction expenditures since 1990, it becomes evident that 
        they range from $37 per student to $934 per student, with a 
        national average of $473.
            (14) According to the National Center for Education 
        Statistics, approximately \1/4\ of public schools are 
        overcrowded and, of those, the larger schools with higher 
        minority enrollments are more seriously overcrowded, that is, 
        are more than 25 percent overenrolled.

SEC. 3. GRANTS FOR SCHOOL CONSTRUCTION AND RENOVATION.

    Title XII of the Elementary and Secondary Education Act of 1965 (20 
U.S.C. 8501 et seq.) is amended to read as follows:

       ``TITLE XII--SCHOOL FACILITIES INFRASTRUCTURE IMPROVEMENT

``SEC. 12001. GRANTS FOR SCHOOL CONSTRUCTION, REPAIR, RENOVATION, AND 
              MODERNIZATION.

    ``(a) Program Authority.--
            ``(1) Reservation for native american and alaska native 
        children in school.--
                    ``(A) In general.--From the amount appropriated 
                under each of subsections (b) and (c) of section 12003 
                to carry out this title for any fiscal year, the 
                Secretary shall reserve 1 percent to provide Federal 
                financial assistance to elementary and secondary 
                schools operated predominately for Native American or 
                Alaska Native children and youth, an Indian tribe, a 
                tribally sanctioned educational authority, or an 
                elementary or secondary school that is operated or 
                funded by the Bureau of Indian Affairs.
                    ``(B) Definitions.--For purposes of this paragraph:
                            ``(i) Indian tribe.--The term `Indian 
                        tribe' means any Indian tribe, band, nation, or 
                        other organized group or community, including 
                        any Alaska Native village or regional or 
                        village corporation as defined in or 
                        established pursuant to the Alaska Native 
                        Claims Settlement Act (43 U.S.C. 1601 et seq.), 
                        that is recognized for the special programs and 
                        services provided by the United States to 
                        Indians because of their status as Indians.
                            ``(ii) Tribally sanctioned educational 
                        authority.--The term `tribally sanctioned 
                        educational authority' means--
                                    ``(I) any department or division of 
                                education operating within the 
                                administrative structure of the duly 
                                constituted governing body of an Indian 
                                tribe; and
                                    ``(II) any nonprofit institution or 
                                organization that is chartered by the 
                                governing body of an Indian tribe to 
                                operate any such school or otherwise to 
                                oversee the delivery of educational 
                                services to members of that tribe and 
                                approved by the Secretary for the 
                                purpose of this paragraph.
            ``(2) Grants to local educational agencies.--From the funds 
        appropriated to carry out this title for each fiscal year and 
        not reserved under paragraph (1), the Secretary shall award 
        grants to local educational agencies in each of the following 
        categories:
                    ``(A) Local educational agencies in which the 
                number of students enrolled is less than 2,500.
                    ``(B) Such agencies in which such number is 2,500 
                or greater but less than 5,000.
                    ``(C) Such agencies in which such number is 5,000 
                or greater but less than 10,000.
                    ``(D) Such agencies in which such number is 10,000 
                or greater but less than 25,000.
                    ``(E) Such agencies in which such number is 25,000 
                or greater but less than 50,000.
                    ``(F) Such agencies in which such number is 50,000 
                or greater.
            ``(3) Maximum award amounts.--The Secretary shall annually 
        set the maximum award amounts for each category described in 
        subsection paragraph (2).
            ``(4) Allocation among categories.--The Secretary shall 
        allocate funds under this title among each of the categories 
        described in paragraph (2) on such basis as the Secretary 
        determines is appropriate, including the relative costs of 
        carrying out activities under this title in eligible local 
        educational agencies in each such category.
            ``(5) Criteria to be used in awarding grants.--
                    ``(A) In general.--The Secretary shall award grants 
                to local educational agencies under this title 
                primarily on the basis of the need of the agency for 
                the school construction, repair, renovation, or 
                modernization, as demonstrated by the condition of its 
                public school facilities.
                    ``(B) Other criteria.--The Secretary may also take 
                into account--
                            ``(i) the extent to which the local 
                        educational agency lacks the fiscal capacity, 
                        including the ability to raise funds through 
                        the full use of such agency's bonding capacity 
                        and otherwise, to undertake the project without 
                        Federal assistance; and
                            ``(ii) such other criteria as the Secretary 
                        may prescribe by regulation.
                    ``(C) Guaranteed state minimum.--To the maximum 
                extent practicable, local educational agencies from 
                each State collectively shall receive at least 0.5 
                percent of the amount awarded under this title for each 
                fiscal year.
    ``(b) Uses of Funds.--
            ``(1) In general.--Each eligible local educational agency 
        receiving a grant under this title--
                    ``(A) for new construction shall use the grant 
                funds only for--
                            ``(i) constructing new public elementary 
                        and secondary school structures--
                                    ``(I) suitable for classrooms, 
                                laboratories, libraries, media centers, 
                                or related facilities; and
                                    ``(II) whose primary purpose is the 
                                academic or vocational instruction of 
                                public elementary and secondary school 
                                students; or
                            ``(ii) acquiring the land on which such a 
                        structure is to be constructed; and
                    ``(B) for repair, renovation, or modernization 
                shall use the grant funds only for such activities with 
                respect to such a structure.
            ``(2) Impermissible uses of funds.--No funds received under 
        this title may be used for--
                    ``(A) payment of maintenance costs in connection 
                with any projects constructed in whole or part with 
                Federal funds provided under this title; or
                    ``(B) stadiums or other facilities primarily used 
                for athletic contests or exhibitions or other events 
                for which admission is charged to the general public.

``SEC. 12002. GENERAL PROVISIONS.

    ``(a) Charter Schools.--A public charter school that constitutes a 
local educational agency under State law shall be eligible for 
assistance under this title under the same terms and conditions as any 
other local educational agency.
    ``(b) Supplement, Not Supplant.--A local educational agency shall 
use Federal funds subject to this title only to supplement the amount 
of funds that would, in the absence of such Federal funds, be made 
available from non-Federal sources.
    ``(c) Special Rule.--Each local educational agency that receives 
funds under this title shall ensure that, if it carries out 
construction, repair, renovation, or modernization through a contract, 
any such contract process ensures the maximum number of qualified 
bidders, including small, minority, and women-owned businesses, through 
full and open competition.
    ``(d) Public Comment.--Each local educational agency receiving 
funds under this title--
            ``(1) shall provide parents, educators, and all other 
        interested members of the community the opportunity to consult 
        on the use of funds;
            ``(2) shall provide the public with adequate and efficient 
        notice of the opportunity described in paragraph (1) in a 
        widely read and distributed medium; and
            ``(3) shall provide the opportunity described in paragraph 
        (1) in accordance with any applicable State and local law 
        specifying how the comments may be received and how the 
        comments may be reviewed by any member of the public.
    ``(e) Reporting.--Each local educational agency receiving funds 
under this title shall submit a report to the Secretary, at such time 
as the Secretary may require, describing the use of such funds.

``SEC. 12003. AUTHORIZATION OF APPROPRIATIONS.

    ``(a) In General.--There are authorized to be appropriated to carry 
out this title $26,600,000,000 for each of fiscal years 2002 through 
2006.
    ``(b) School Construction.--Of such total amount, $8,400,000,000 
are authorized to be appropriated for each such fiscal year for grants 
for constructing new public elementary and secondary school facilities 
and acquiring the land on which such facilities are to be constructed.
    ``(c) School Repair, Renovation, and Modernization.--Of such total 
amount, $18,200,000,000 are authorized to be appropriated for each such 
fiscal year for grants for repair, renovation, and modernization of 
public elementary and secondary school facilities.''.

SEC. 4. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.

    (a) In General.--Chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subchapter:

        ``Subchapter XI--Public School Modernization Provisions

                              ``Sec. 1400K. Credit to holders of 
                                        qualified public school 
                                        modernization bonds.
                              ``Sec. 1400L. Qualified school 
                                        modernization bonds.

``SEC. 1400K. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL 
              MODERNIZATION BONDS.

    ``(a) Allowance of Credit.--In the case of a taxpayer who holds a 
qualified public school modernization bond on a credit allowance date 
of such bond which occurs during the taxable year, there shall be 
allowed as a credit against the tax imposed by this chapter for such 
taxable year an amount equal to the sum of the credits determined under 
subsection (b) with respect to credit allowance dates during such year 
on which the taxpayer holds such bond.
    ``(b) Amount of Credit.--
            ``(1) In general.--The amount of the credit determined 
        under this subsection with respect to any credit allowance date 
        for a qualified public school modernization bond is 25 percent 
        of the annual credit determined with respect to such bond.
            ``(2) Annual credit.--The annual credit determined with 
        respect to any qualified public school modernization bond is 
        the product of--
                    ``(A) the applicable credit rate, multiplied by
                    ``(B) the outstanding face amount of the bond.
            ``(3) Applicable credit rate.--For purposes of paragraph 
        (1), the applicable credit rate with respect to an issue is the 
        rate equal to an average market yield (as of the day before the 
        date of issuance of the issue) on outstanding long-term 
        corporate debt obligations (determined under regulations 
        prescribed by the Secretary).
            ``(4) Special rule for issuance and redemption.--In the 
        case of a bond which is issued during the 3-month period ending 
        on a credit allowance date, the amount of the credit determined 
        under this subsection with respect to such credit allowance 
        date shall be a ratable portion of the credit otherwise 
        determined based on the portion of the 3-month period during 
        which the bond is outstanding. A similar rule shall apply when 
        the bond is redeemed.
    ``(c) Limitation Based on Amount of Tax.--
            ``(1) In general.--The credit allowed under subsection (a) 
        for any taxable year shall not exceed the excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under part 
                IV of subchapter A (other than subpart C thereof, 
                relating to refundable credits).
            ``(2) Carryover of unused credit.--If the credit allowable 
        under subsection (a) exceeds the limitation imposed by 
        paragraph (1) for such taxable year, such excess shall be 
        carried to the succeeding taxable year and added to the credit 
        allowable under subsection (a) for such taxable year.
    ``(d) Credit Allowance Date.--For purposes of this section, the 
term `credit allowance date' means--
            ``(1) March 15,
            ``(2) June 15,
            ``(3) September 15, and
            ``(4) December 15.
Such term includes the last day on which the bond is outstanding.
    ``(e) Other Definitions.--For purposes of this subchapter--
            ``(1) Local educational agency.--The term `local 
        educational agency' has the meaning given to such term by 
        section 14101 of the Elementary and Secondary Education Act of 
        1965. Such term includes the local educational agency that 
        serves the District of Columbia but does not include any other 
        State agency.
            ``(2) Bond.--The term `bond' includes any obligation.
            ``(3) State.--The term `State' includes the District of 
        Columbia and any possession of the United States.
            ``(4) Public school facility.--The term `public school 
        facility' shall not include--
                    ``(A) any stadium or other facility primarily used 
                for athletic contests or exhibitions or other events 
                for which admission is charged to the general public, 
                or
                    ``(B) any facility which is not owned by a State or 
                local government or any agency or instrumentality of a 
                State or local government.
    ``(f) Credit Included in Gross Income.--Gross income includes the 
amount of the credit allowed to the taxpayer under this section 
(determined without regard to subsection (c)) and the amount so 
included shall be treated as interest income.
    ``(g) Bonds Held by Regulated Investment Companies.--If any 
qualified public school modernization bond is held by a regulated 
investment company, the credit determined under subsection (a) shall be 
allowed to shareholders of such company under procedures prescribed by 
the Secretary.
    ``(h) Credits May Be Stripped.--Under regulations prescribed by the 
Secretary--
            ``(1) In general.--There may be a separation (including at 
        issuance) of the ownership of a qualified public school 
        modernization bond and the entitlement to the credit under this 
        section with respect to such bond. In case of any such 
        separation, the credit under this section shall be allowed to 
        the person who on the credit allowance date holds the 
        instrument evidencing the entitlement to the credit and not to 
        the holder of the bond.
            ``(2) Certain rules to apply.--In the case of a separation 
        described in paragraph (1), the rules of section 1286 shall 
        apply to the qualified public school modernization bond as if 
        it were a stripped bond and to the credit under this section as 
        if it were a stripped coupon.
    ``(i) Treatment for Estimated Tax Purposes.--Solely for purposes of 
sections 6654 and 6655, the credit allowed by this section to a 
taxpayer by reason of holding a qualified public school modernization 
bonds on a credit allowance date shall be treated as if it were a 
payment of estimated tax made by the taxpayer on such date.
    ``(j) Credit May Be Transferred.--Nothing in any law or rule of law 
shall be construed to limit the transferability of the credit allowed 
by this section through sale and repurchase agreements.
    ``(k) Reporting.--Issuers of qualified public school modernization 
bonds shall submit reports similar to the reports required under 
section 149(e).
    ``(l) Termination.--This section shall not apply to any bond issued 
after September 30, 2007.

``SEC. 1400L. QUALIFIED PUBLIC SCHOOL MODERNIZATION BONDS.

    ``(a) Qualified School Construction Bond.--For purposes of this 
subchapter, the term `qualified school modernization bond' means any 
bond issued as part of an issue if--
            ``(1) 95 percent or more of the proceeds of such issue are 
        to be used for the construction, rehabilitation, repair, or 
        modernization of a public school facility or for the 
        acquisition of land on which such a facility is to be 
        constructed with part of the proceeds of such issue,
            ``(2) the bond is issued by a State or local government 
        within the jurisdiction of which such school is located,
            ``(3) the issuer designates such bond for purposes of this 
        section, and
            ``(4) the term of each bond which is part of such issue 
        does not exceed 15 years.
    ``(b) Limitation on Amount of Bonds Designated.--The maximum 
aggregate face amount of bonds issued during any calendar year which 
may be designated under subsection (a) by any issuer shall not exceed 
the sum of--
            ``(1) the limitation amounts allocated under subsection (d) 
        for such calendar year to such issuer, and
            ``(2) if such issuer is a large local educational agency 
        (as defined in subsection (e)(4)) or is issuing on behalf of 
        such an agency, the limitation amounts allocated under 
        subsection (e) for such calendar year to such agency.
    ``(c) National Limitations on Amount of Bonds Designated.--
            ``(1) School construction.--In the case of bonds issued as 
        part of an issue where 95 percent or more of the proceeds of 
        such issue are to be used for the construction of a public 
        school facility or for the acquisition of land on which such a 
        facility is to be constructed, there is a national qualified 
        school construction bond limitation for each calendar year. 
        Such limitation is--
                    ``(A) $1,584,000,000 for 2002,
                    ``(B) $1,584,000,000 for 2003,
                    ``(C) $1,584,000,000 for 2004,
                    ``(D) $1,584,000,000 for 2005,
                    ``(E) $1,584,000,000 for 2006, and
                    ``(F) except as provided in subsection (f), zero 
                after 2006.
            ``(2) School rehabilitation, repair, or modernization.--In 
        the case of bonds issued as part of an issue where 95 percent 
        or more of the proceeds of such issue are to be used for the 
        rehabilitation, repair, or modernization of a public school 
        facility, there is a national qualified school modernization 
        bond limitation for each calendar year. Such limitation is--
                    ``(A) $7,722,000,000 for 2002,
                    ``(B) $7,722,000,000 for 2003,
                    ``(C) $7,722,000,000 for 2004,
                    ``(D) $7,722,000,000 for 2005,
                    ``(E) $7,722,000,000 for 2006, and
                    ``(F) except as provided in subsection (f), zero 
                after 2006.
    ``(d) 60 Percent of Limitations Allocated Among States.--
            ``(1) In general.--60 percent of each of the limitations 
        applicable under subsection (c) for any calendar year shall be 
        allocated by the Secretary among the States in proportion to 
the respective numbers of children in each State who have attained age 
5 but not age 18 for the most recent fiscal year ending before such 
calendar year, except that no State shall receive less than 0.5 percent 
of any such limitation. The limitation amounts allocated to a State 
under the preceding sentence shall be allocated by the State to issuers 
within such State and such allocations may be made only if there is an 
approved State application.
            ``(2) Allocations to certain possessions.--The amounts to 
        be allocated under paragraph (1) to any possession of the 
        United States other than Puerto Rico shall be the amounts which 
        would have been allocated if all allocations under paragraph 
        (1) were made on the basis of respective populations of 
        individuals below the poverty line (as defined by the Office of 
        Management and Budget). In making other allocations, the 
        amounts to be allocated under paragraph (1) shall be reduced by 
        the aggregate amount allocated under this paragraph to 
        possessions of the United States.
            ``(3) Allocations for indian schools.--
                    ``(A) School construction.--In addition to the 
                amounts otherwise allocated under this subsection, 
                $16,000,000 for each of calendar years 2002 through 
                2006 shall be allocated by the Secretary of the 
                Interior for purposes of the construction of schools 
                funded by the Bureau of Indian Affairs.
                    ``(B) School rehabilitation, repair, or 
                modernization.--In addition to the amounts otherwise 
                allocated under this subsection, $78,000,000 for each 
                of calendar years 2002 through 2006 shall be allocated 
                by the Secretary of the Interior for purposes of the 
                rehabilitation, repair, and modernization of schools 
                funded by the Bureau of Indian Affairs.
                    ``(C) Treatment of indian tribal governments.--In 
                the case of amounts allocated under this paragraph, 
                Indian tribal governments (as defined in section 7871) 
                shall be treated as qualified issuers for purposes of 
                this subchapter.
            ``(4) Approved state application.--For purposes of 
        paragraph (1), the term `approved State application' means an 
        application which is approved by the Secretary of Education and 
        which includes--
                    ``(A) the results of a recent publicly-available 
                survey (undertaken by the State with the involvement of 
                local education officials, members of the public, and 
                experts in school construction and management) of such 
                State's needs for public school facilities, including 
                descriptions of--
                            ``(i) health and safety problems at such 
                        facilities,
                            ``(ii) the capacity of public schools in 
                        the State to house projected enrollments, and
                            ``(iii) the extent to which the public 
                        schools in the State offer the physical 
                        infrastructure needed to provide a high-quality 
                        education to all students, and
                    ``(B) a description of how the State will allocate 
                to local educational agencies, or otherwise use, its 
                allocation under this subsection to address the needs 
                identified under subparagraph (A), including a 
                description of how it will--
                            ``(i) ensure that the needs of both rural 
                        and urban areas will be recognized,
                            ``(ii) give highest priority to localities 
                        with the greatest needs, as demonstrated by 
                        inadequate school facilities coupled with a low 
                        level of resources to meet those needs,
                            ``(iii) use its allocations under this 
                        subsection to assist localities that lack the 
                        fiscal capacity to issue bonds on their own, 
                        and
                            ``(iv) ensure that its allocations under 
                        this subsection are used only to supplement, 
                        and not supplant, the amount of school 
                        construction, rehabilitation, repair, and 
                        modernization in the State that would have 
                        occurred in the absence of such allocation.
        Any allocation under paragraph (1) by a State shall be binding 
        if such State reasonably determined that the allocation was in 
        accordance with the plan approved under this paragraph.
    ``(e) 40 Percent of Limitations Allocated Among Largest School 
Districts.--
            ``(1) In general.--40 percent of each of the limitations 
        applicable under subsection (c) for any calendar year shall be 
        allocated under paragraph (2) by the Secretary among local 
        educational agencies which are large local educational agencies 
        for such year. No qualified school modernization bond may be 
        issued by reason of an allocation to a large local educational 
        agency under the preceding sentence unless such agency has an 
        approved local application.
            ``(2) Allocation formula.--The amount to be allocated under 
        paragraph (1) for any calendar year shall be allocated among 
        large local educational agencies in proportion to the 
        respective amounts each such agency received for Basic Grants 
        under subpart 2 of part A of title I of the Elementary and 
        Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for 
        the most recent fiscal year ending before such calendar year.
            ``(3) Allocation of unused limitation to state.--The amount 
        allocated under this subsection to a large local educational 
        agency for any calendar year may be reallocated by such agency 
        to the State in which such agency is located for such calendar 
        year. Any amount reallocated to a State under the preceding 
        sentence may be allocated as provided in subsection (d)(1).
            ``(4) Large local educational agency.--For purposes of this 
        section, the term `large local educational agency' means, with 
        respect to a calendar year, any local educational agency if 
        such agency is--
                    ``(A) among the 100 local educational agencies with 
                the largest numbers of children aged 5 through 17 from 
                families living below the poverty level, as determined 
                by the Secretary using the most recent data available 
                from the Department of Commerce that are satisfactory 
                to the Secretary, or
                    ``(B) 1 of not more than 25 local educational 
                agencies (other than those described in subparagraph 
                (A)) that the Secretary of Education determines (based 
                on the most recent data available satisfactory to the 
                Secretary) are in particular need of assistance, based 
                on a low level of resources for school construction, a 
                high level of enrollment growth, or such other factors 
                as the Secretary deems appropriate.
            ``(5) Approved local application.--For purposes of 
        paragraph (1), the term `approved local application' means an 
        application which is approved by the Secretary of Education and 
        which includes--
                    ``(A) the results of a recent publicly-available 
                survey (undertaken by the local educational agency or 
                the State with the involvement of school officials, 
                members of the public, and experts in school 
                construction and management) of such agency's needs for 
                public school facilities, including descriptions of--
                            ``(i) the overall condition of the local 
                        educational agency's school facilities, 
                        including health and safety problems,
                            ``(ii) the capacity of the agency's schools 
                        to house projected enrollments, and
                            ``(iii) the extent to which the agency's 
                        schools offer the physical infrastructure 
                        needed to provide a high-quality education to 
                        all students,
                    ``(B) a description of how the local educational 
                agency will use its allocations under this subsection 
                to address the needs identified under subparagraph (A), 
                and
                    ``(C) a description of how the local educational 
                agency will ensure that its allocations under this 
                subsection are used only to supplement, and not 
                supplant, the amount of school construction, 
                rehabilitation, repair, and modernization in the 
                locality that would have occurred in the absence of 
                such allocations.
        A rule similar to the rule of the last sentence of subsection 
        (d)(4) shall apply for purposes of this paragraph.
    ``(f) Carryover of Unused Limitation.--If for any calendar year--
            ``(1) any amount allocated under subsection (d) to any 
        State, exceeds
            ``(2) the amount of bonds issued during such year which are 
        designated under subsection (a) pursuant to such allocation,
the limitation amount under such subsection for such State for the 
following calendar year shall be increased by the amount of such 
excess. A similar rule shall apply to the amounts allocated under 
subsection (d)(3) or (e).
    ``(g) Special Rules Relating to Arbitrage.--
            ``(1) In general.--A bond shall not be treated as failing 
        to meet the requirement of subsection (a)(1) solely by reason 
        of the fact that the proceeds of the issue of which such bond 
        is a part are invested for a temporary period (but not more 
        than 36 months) until such proceeds are needed for the purpose 
        for which such issue was issued.
            ``(2) Binding commitment requirement.--Paragraph (1) shall 
        apply to an issue only if, as of the date of issuance, there is 
        a reasonable expectation that--
                    ``(A) at least 10 percent of the proceeds of the 
                issue will be spent within the 6-month period beginning 
                on such date for the purpose for which such issue was 
                issued, and
                    ``(B) the remaining proceeds of the issue will be 
                spent with due diligence for such purpose.
            ``(3) Earnings on proceeds.--Any earnings on proceeds 
        during the temporary period shall be treated as proceeds of the 
        issue for purposes of applying subsection (a)(1) and paragraph 
        (1) of this subsection.''.
    (b) Reporting.--Subsection (d) of section 6049 of such Code 
(relating to returns regarding payments of interest) is amended by 
adding at the end the following new paragraph:
            ``(8) Reporting of credit on qualified public school 
        modernization bonds.--
                    ``(A) In general.--For purposes of subsection (a), 
                the term `interest' includes amounts includible in 
                gross income under section 1400K(f) and such amounts 
                shall be treated as paid on the credit allowance date 
                (as defined in section 1400K(d)(2)).
                    ``(B) Reporting to corporations, etc.--Except as 
                otherwise provided in regulations, in the case of any 
                interest described in subparagraph (A) of this 
                paragraph, subsection (b)(4) of this section shall be 
                applied without regard to subparagraphs (A), (H), (I), 
                (J), (K), and (L)(i).
                    ``(C) Regulatory authority.--The Secretary may 
                prescribe such regulations as are necessary or 
                appropriate to carry out the purposes of this 
                paragraph, including regulations which require more 
                frequent or more detailed reporting.''
    (c) Conforming Amendments.--
            (1) Subchapter U of chapter 1 of such Code is amended by 
        striking part IV, by redesignating part V as part IV, and by 
        redesignating section 1397F as section 1397E.
            (2) The table of subchapters for chapter 1 of such Code is 
        amended by adding at the end the following new item:

                              ``Subchapter XI. Public school 
                                        modernization provisions.''
            (3) The table of parts of subchapter U of chapter 1 of such 
        Code is amended by striking the last 2 items and inserting the 
        following item:

                              ``Part IV. Regulations.''
    (d) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
obligations issued after December 31, 2001.
            (2) Repeal of restriction on zone academy bond holders.--In 
        the case of bonds to which section 1397E of the Internal 
        Revenue Code of 1986 (as in effect before the date of the 
        enactment of this Act) applies, the limitation of such section 
        to eligible taxpayers (as defined in subsection (d)(6) of such 
        section) shall not apply after the date of the enactment of 
        this Act.

SEC. 5. APPLICATION OF CERTAIN LABOR STANDARDS ON CONSTRUCTION PROJECTS 
              FINANCED UNDER PUBLIC SCHOOL MODERNIZATION PROGRAM.

    Section 439 of the General Education Provisions Act (relating to 
labor standards) is amended--
            (1) by inserting ``(a)'' before ``All laborers and 
        mechanics'', and
            (2) by adding at the end the following:
    ``(b)(1) For purposes of this section, the term `applicable 
program' also includes the qualified zone academy bond provisions 
enacted by section 226 of the Taxpayer Relief Act of 1997 and the 
program established by section 4 of the Federal School Construction Act 
of 2001.
    ``(2) A State or local government participating in a program 
described in paragraph (1) shall--
            ``(A) in the awarding of contracts, give priority to 
        contractors with substantial numbers of employees residing in 
        the local education area to be served by the school being 
        constructed; and
            ``(B) include in the construction contract for such school 
        a requirement that the contractor give priority in hiring new 
        workers to individuals residing in such local education area.
    ``(3) In the case of a program described in paragraph (1), nothing 
in this subsection or subsection (a) shall be construed to deny any tax 
credit allowed under such program. If amounts are required to be 
withheld from contractors to pay wages to which workers are entitled, 
such amounts shall be treated as expended for construction purposes in 
determining whether the requirements of such program are met.''.

SEC. 6. EMPLOYMENT AND TRAINING ACTIVITIES RELATING TO CONSTRUCTION OR 
              RECONSTRUCTION OF PUBLIC SCHOOL FACILITIES.

    (a) In General.--Section 134 of the Workforce Investment Act of 
1998 (29 U.S.C. 2864) is amended by adding at the end the following:
    ``(f) Local Employment and Training Activities Relating to 
Construction or Reconstruction of Public School Facilities.--
            ``(1) In general.--In order to provide training services 
        related to construction or reconstruction of public school 
        facilities receiving funding assistance under an applicable 
        program, each State shall establish a specialized program of 
        training meeting the following requirements:
                    ``(A) The specialized program provides training for 
                jobs in the construction industry.
                    ``(B) The program provides trained workers for 
                projects for the construction or reconstruction of 
                public school facilities receiving funding assistance 
                under an applicable program.
                    ``(C) The program ensures that skilled workers 
                (residing in the area to be served by the school 
                facilities) will be available for the construction or 
                reconstruction work.
            ``(2) Coordination.--The specialized program established 
        under paragraph (1) shall be integrated with other activities 
        under this Act, with the activities carried out under the 
        National Apprenticeship Act of 1937 by the State Apprenticeship 
        Council or through the Bureau of Apprenticeship and Training in 
        the Department of Labor, as appropriate, and with activities 
        carried out under the Carl D. Perkins Vocational and Technical 
        Education Act of 1998. Nothing in this subsection shall be 
        construed to require services duplicative of those referred to 
        in the preceding sentence.
            ``(3) Applicable program.--In this subsection, the term 
        `applicable program' has the meaning given the term in section 
        439(b) of the General Education Provisions Act (relating to 
        labor standards).''.
    (b) State Plan.--Section 112(b)(17)(A) of the Workforce Investment 
Act of 1998 (29 U.S.C. 2822(b)(17)(A)) is amended--
            (1) in clause (iii), by striking ``and'' at the end;
            (2) by redesignating clause (iv) as clause (v); and
            (3) by inserting after clause (iii) the following:
                            ``(iv) how the State will establish and 
                        carry out a specialized program of training 
                        under section 134(f); and''.
                                 <all>